Cutting lending interest rates: inevitable trend
24-JUL-2008 Intellasia | 22/Jul/2008 Dien Dan Doanh Nghiep
Jul 24, 2008 - 7:00:00 AM
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Banks have recently not rushed to raise deposit interest rates as previously. Even, some banks are cutting deposit interest rates in a bid to reduce input costs. Meanwhile, lending interest rates are also going down. Many people said that this is an inevitable trend when inflation is being reined.
Some banks announced that they decreased lending interest rates to less than the regulated ceiling lending interest rate of 21% a year.
Since early July, at least five directors of branches, transaction offices of commercial joint stock banks, Saigon Thuong Tin Commercial Bank (Sacombank), Vietnam Technological and Commercial Bank (Techcombank), Vietnam International Bank (VIBank), have been asked to be dismissed. On July 1, the central bank asked VIBank to settle violations of its Saigon branch. Accordingly, the director of VIBank's Saigon branch was required to be dismissed because VIBank Saigon set lending interest rates higher than the regulated ceiling lending interest rate.
On July 17, the central bank continued asking Techcombank's leaders to dismiss the director of Techcombank's HCM City branch, Le Duc Tho and the vice head of Techcombank' Thu Duc transaction office because the two officials applied a lending interest rate of up to 24.4% a year. A day earlier, the central bank requested Sacombank to dismiss the head of Sacombank's Tan Dinh transaction office because this official applied a lending interest rate of up to 1.92% a year or 23.04% a year.
While some banks have continuously boosted lending interest rates, some others announced that they cut lending interest rates. Such contradictory move can be seen through the fact that Vietnam's three largest banks and the Vietnam Export and Import Commercial Bank (Eximbank) have continuously announced that they lower lending interest rates but do not cut deposit interest rates. Namely, the Bank for Investment and Development of Vietnam (Bidv) announced that it reduced lending interest rates of dong loans by 0.2% a year for all clients and by 0.6% a year for priority clients. As for short-term US dollar loans, Bidv decreased lending interest rates by 2% a year to 8.8% a year for priority import items and 9.8% a year for other goods items.
The Bank for Agriculture and Rural Development of Vietnam (Agribank) also announced that it reduced lending interest rates by 0.5% a year for dong loans and 2% a year for US dollar loans.
The Vietnam Bank for Foreign Trade reported the lowest reduction for dong loans. The bank reduced lending interest rates of dong loans by 1% for priority clients. In addition, Vietcombank also announced that it cut lending interest rates of US dollar loans by 0.5% a year to only 8.5% a year.
Particularly, Eximbank on July 18 decided to reduce lending interest rates for dong loans by 1% a year for all borrowers at Eximbank from July 19.
Some people said that cutting lending interest rates is an efficient policy in attracting borrowers.
It is forecasted that in July and upcoming months, inflation will be reined and accordingly interest rates will be expectedly revised properly.
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